Monday, February 21, 2005

Eon Labs acquired

Novartis announced that it is buying (the part that it doesn't already own, of) Eon Labs (ELAB) at $30/share, a small premium over the previous day's close.

I had written earlier about the generics sector after Icahn made a(n) (unsuccessful) bid for Mylan.

Eon Labs was among the expensive players in this field. The others are still cheap and worth buying - many even have strong insider buying.

I own a few of Ivax (IVX), Mylan (MYL), Alpharma (ALO), Par Pharmaceuticals (PRX), Andrx (ADRX), Watson Pharmaceuticals (WPI), Taro (TARO) and Teva (TEVA).

Eon Labs' takeover will set off a chain reaction in this sector. Except for Teva, which is likely to remain independent, the rest will all be targets.

With this deal, Novartis has pushed Teva to no. 2 in the generics sector. That itself should force Teva to bulk up by acquiring a smaller competitor. The most likely candidate - Alpharma, given that they already have a partnership, and a merger between them offers large cost-savings.

Each time one of the above comes out with disappointing news that sends its stock near its 52-week lows, and especially if it is followed up by insider buying, it is time to add.


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